Decorative Paints

  • ROS up at 13.5% driven by pricing initiatives and continued strong performance in EMEA
  • Price/mix was up 4% and volumes were flat overall, excluding China

Q2 2019:

  • Revenue was flat and up 2% in constant currencies; price/mix was 4% positive, driven by pricing initiatives, while acquisitions contributed 2%
  • Adjusted operating income increased to €136 million (2018: €123 million) with pricing initiatives and cost savings more than compensating for higher raw material costs and lower volumes
  • Volumes were 4% lower due to our value over volume strategy and lower volumes in China (excluding China, volumes were flat)
  • ROS up at 13.5% (2018: 12.2%); ROI up at 12.2% (2018: 11.8%)

Half-year 2019:

  • Revenue was flat and up 2% in constant currencies; price/mix was 5% positive, driven by pricing initiatives, while acquisitions contributed 2%
  • Adjusted operating income increased to €196 million (2018: €179 million) with pricing initiatives and cost savings more than compensating for higher raw material costs and lower volumes
  • Volumes were 5% lower due to our value over volume strategy and lower volumes in China (excluding China, volumes were 1% lower)
  • ROS up at 10.6% (2018: 9.7%)
New paint range pounces on French market (Photo)

New paint range pounces on French market

Our Dulux Valentine decorative paint brand in France has roared onto the market with a new EasyCare product called Color Resist. The EasyCare range (also known as EasyClean) has now been introduced in 26 countries worldwide, including brands such as Dulux and Marshall. The extensive launch in France proved to be a great success, with a widespread TV campaign due to continue into August. The French brand – which uses a distinctive black panther on its packaging – launched the Color Resist range in April.

Q2 2019:

Revenue was flat and up 2% in constant currencies. Continued focus on pricing initiatives contributed to positive price/mix of 4%, while volumes were lower. Acquisitions contributed 2% to revenues.

Adjusted operating income increased to €136 million (2018: €123 million). Continued pricing initiatives and cost savings more than offset higher raw material costs and lower volumes, resulting in ROS of 13.5% (2018: 12.2%).

Operating income increased to €166 million and was positively impacted by €30 million identified items related to a gain on a disposal following asset network optimization (€57 million) and transformation costs (€27 million). In 2018, operating income of €111 million was adversely impacted by €12 million identified items.

Revenue development Q2 2019

Decorative Paints – Revenue development Q2 2019 (bar chart)

Half-year 2019:

Revenue was flat and up 2% in constant currencies. Continued focus on pricing initiatives contributed to positive price/mix of 5%, while volumes were lower. Acquisitions contributed 2% to revenues.

Adjusted operating income increased to €196 million (2018: €179 million). Continued pricing initiatives and cost savings offset higher raw material costs and lower volumes, resulting in ROS of 10.6% (2018: 9.7%).

Operating income increased to €220 million and was positively impacted by €24 million identified items related to a gain on a disposal following asset network optimization (€57 million) and transformation costs (€33 million). In 2018, operating income of €159 million was adversely impacted by €20 million identified items.

Revenue development half-year 2019

Decorative Paints – Revenue development half-year 2019 (bar chart)

(XLS:) Download XLS

Revenue

Second quarter

 

January-June

2018

2019

∆%

∆% CC *

in € millions

2018

2019

∆%

∆% CC *

*

Change excluding currency impact

591

620

5%

6%

Decorative Paints Europe, Middle East and Africa

1,082

1,126

4%

6%

107

103

(4%)

4%

Decorative Paints South America

212

203

(5%)

9%

310

284

(8%)

(9%)

Decorative Paints Asia

561

524

(7%)

(8%)

(2)

(2)

 

 

Other/intragroup
eliminations

(3)

(2)

 

 

1,006

1,005

–%

2%

Total

1,852

1,849

–%

2%

(XLS:) Download XLS

Key financial figures

Second quarter

 

January-June

2018

2019

∆%

in € millions

2018

2019

∆%

1

Adjusted operating income and Operating income in 2019 include the impact from adoption of IFRS 16 “Leases” (as per January 1, 2019). As a result interest expenses, which previously were included in Lease expenses within operating income, are now recorded in Net financing expenses. The 2018 comparative figures have not been restated. Further details are provided in Notes to the condensed consolidated financial statements.

2

Average invested capital includes the impact from adoption of IFRS 16 “Leases” (as per January 1, 2019). Right-of-use assets (€165 million as per January 1, 2019) have been added to Invested capital whereas Lease liabilities remain excluded from Invested capital. The 2018 comparative figures have not been restated.

123

136

11%

Adjusted operating income

179

196

9%

111

166

50%

Operating income 1

159

220

38%

12.2

13.5

 

ROS%

9.7

10.6

 

 

 

 

 

 

 

 

 

 

 

Average invested capital 2

2,813

2,984

 

 

 

 

ROI%

11.8

12.2

 

Europe, Middle East and Africa

Revenue in Q2 was up 5% and up 6% in constant currencies due to successful pricing initiatives, partly offset by lower volumes. The acquisition of Fabryo in Romania, Xylazel in Spain and Doves Decorating Supplies in the UK contributed 4% to revenues. The introduction of Extreme Stay Clean exterior woodstain and a next generation stain resistant wall paint continued to support our market positions in Eastern Europe and Italy. Our EasyCare product called Color Resist has been introduced worldwide, including France.

Revenue in the first half-year was 4% higher and up 6% in constant currencies, driven by volume growth and positive price/mix effects. Adverse currency impacts mainly related to the pound sterling.

South America

Revenue in Q2 was 4% lower, although up 4% in constant currencies, mainly driven by positive price/mix effects and a strengthened position in the premium segment. Pricing initiatives and cost control offset increased raw material costs.

Revenue in the first half-year was 5% lower, although up 9% in constant currencies. Currency impact was driven by the Brazilian real and the Argentinian peso, which was partly offset by the application of IAS 29 for hyperinflation accounting for Argentina.

Asia

Revenue in Q2 decreased 8%, and was 9% lower in constant currencies. This follows the implementation of our value over volume strategy and continued focus on pricing initiatives. Volumes were lower in China, also impacted by macro-economic developments resulting in lower consumer confidence. Volumes grew in India, Thailand, Malaysia and Vietnam. The acquisition of Colourland Paints in Malaysia contributed 2% to revenues.

Revenue in the first half-year was 7% lower, and 8% lower in constant currencies. Volumes in China were lower, while growth continued in India, Malaysia and Vietnam.